Section 65(105)(w) of the Finance Act, 1994 – Security Agency’s Services – Clarification regarding service tax on escort charges collected by State Police from various clients under security agency’s service
LETTER [F.No.137/131/2010-CX.40], dated 20-5-2011
1. Certain field formations have raised the issue of leviability of service tax on escort charges collected by State Police from banks for escorting cash, under ‘Security Agency service’.
2. While, most of the field formations are of the view that such charges should be leviable to service tax under Security Agency service, doubts have been expressed from certain formations.
3. The matter has been examined. Earlier in the past, the matter regarding service tax on fee collected by Public Authorities while performing statutory functions/duties has been addressed in Board’s Circular No. 89/7/2006 – ST, dated 18-12-2006. This circular clarified that activities performed by sovereign/public authorities under the provisions of law are in the nature of statutory obligations which are to be fulfilled in accordance with law and therefore such activity do not constitute provision of taxable service to a person and no service tax is leviable on such activities. In the current case, security services provided in relation to providing escort service to the banks cannot be said to be statutory/sovereign function. In a related matter of security provided by Central Industrial Security Force (CISF), the Ministry of Law and Justice had opined that services provided by a Central Government Department to any PSU or State Government can be considered as a service provided to any external person or agency and thereby can be taxed under the legal provisions contained in the Finance Act, 1994.
4. In view of the above, it is clarified that the service provided by the State Police in providing escort service as mentioned above for a consideration is leviable to service tax under ‘Security Agency service [Section 65(105)(w) of the Finance Act, 1944]. All formations are requested to safeguard revenue accordingly.